Correlation Between Trane Technologies and NISSAN CHEMICAL

Can any of the company-specific risk be diversified away by investing in both Trane Technologies and NISSAN CHEMICAL at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Trane Technologies and NISSAN CHEMICAL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Trane Technologies plc and NISSAN CHEMICAL IND, you can compare the effects of market volatilities on Trane Technologies and NISSAN CHEMICAL and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Trane Technologies with a short position of NISSAN CHEMICAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trane Technologies and NISSAN CHEMICAL.

Diversification Opportunities for Trane Technologies and NISSAN CHEMICAL

0.79

Correlation Coefficient

Trane Technologies  NISSAN CHEMICAL

Poor diversification

The 3 months correlation between Trane and NISSAN is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Trane Technologies plc and NISSAN CHEMICAL IND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NISSAN CHEMICAL IND and Trane Technologies is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Trane Technologies plc are associated (or correlated) with NISSAN CHEMICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NISSAN CHEMICAL IND has no effect on the direction of Trane Technologies i.e., Trane Technologies and NISSAN CHEMICAL go up and down completely randomly.

Pair Corralation between Trane Technologies and NISSAN CHEMICAL

Assuming the 90 days horizon Trane Technologies plc is expected to generate 1.37 times more return on investment than NISSAN CHEMICAL. However, Trane Technologies is 1.37 times more volatile than NISSAN CHEMICAL IND. It trades about 0.25 of its potential returns per unit of risk. NISSAN CHEMICAL IND is currently generating about 0.09 per unit of risk. If you would invest  31,165  in Trane Technologies plc on September 3, 2024 and sell it today you would earn a total of  8,135  from holding Trane Technologies plc or generate 26.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Trane Technologies plc  vs.  NISSAN CHEMICAL IND

Trane Technologies plc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Trane Technologies plc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Trane Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

NISSAN CHEMICAL IND

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NISSAN CHEMICAL IND are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, NISSAN CHEMICAL is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Trane Technologies and NISSAN CHEMICAL

The main advantage of trading using opposite Trane Technologies and NISSAN CHEMICAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trane Technologies position performs unexpectedly, NISSAN CHEMICAL can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in NISSAN CHEMICAL will offset losses from the drop in NISSAN CHEMICAL's long position.

The idea behind Trane Technologies plc and NISSAN CHEMICAL IND pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..